Renting to College Students (24k opportunity)

16 Replies

A friend of my parents has a son in college, and came to me asking if I knew of anything to rent close to the school. I have a rental I am finishing up, but have put nicer finishes in it planning to not rent to college students.  These students will be freshman, and are "planning" to rent together for 4 years. Having been young at one time, I know this is not a reality. However, I do see it happening for 1 year.

It is a duplex 4/1.5 down and 2/1 up. Fenced in side yard, single car garage in back, parking for 4-5 cars. 

In talking to her she had said her son and his buddies are looking for a place to rent, they had all planned to take extra money from their loans and pay their rents a year in advance.  I was unsure about renting it to students because of the finishes I chose. Knowing her son fairly well, I know he/they will be partying in the house, likely to do 2-3k worth of damage. However she said there are 4 of them, they are all likely willing to pay for a years rent up front. Question being.

In the 4/2 - If you can get $500 a head for a year from each student up front (essentially 6k per student) $24,000 for the year in one payment, knowing it will be trashed, are you doing it? 

2. This will likely hurt my chances for tenancy upstairs in the 2/1, unless it rents to students as well.

3. Are you just adding eviction clauses in the lease that have to do with noise complaints, unpaid bills, as well as taking a large deposit for damages?

4. Am I an idiot if I don't do this?

The 4/1.5 would likely rent for $1100/mo with the 2/1 around $750.

I am leaning towards doing this, I am just trying to weigh my short term advantage vs the longer term set back.

Thanks

I used to live in a college town and currently have some investments there... so lets go over a few things.

1.)  Ordinances?  I know that I always check the ordinance mapping before purchasing anything so that I know who I am allowed to rent to.  If your house is in a residential area that is set up to not be college student renting friendly then be careful because the neighbors could turn you into the city and then fun with that.

2.)  You are approaching this right in taking into account that there will most likely be damages.  If you proceed then take a video of the property the day before they take ownership (or day of) and post it to youtube and don't make it publicly broadcasted/searchable.  If you ever have to provide proof of condition then you can always refer to the link as video proof.  This is in addition to your move in report.

3.)  HAVE THE PARENTS SIGN THE LEASE AS WELL!!!! do your background check on each tennant as well as their co-signing parent.  If you have damages then be sure to inform the parents of the damages and additional moneys owed.  This will keep the parents on the kids a bit (but damages will occure)

4.)  Do your walkthroughs more often.  For college rentals I do mine quarterly rather than twice a year.  If something is damaged and needs fixed I fix and bill (again, copying the parents).  This allows you to let them get that realization that they can cause themselves financial strain.

5.)  Keep in the usual eviction clauses, you might need them.

6.)  I like to have each student have their own lease.  View it as them renting out the bedroom with the unit being common areas.  This way if one wants to go they can go while the others stay on.

7.)  Utilities in their name not yours!  Time for them to learn some responsibility.

8.)  If one unit is college students, all units are college students.  That just takes down on headaches.

9.)  Be ready for pets and if you don't allow them to be a firm NO.

If I can think of any more pieces of advice I will post them.  Renting to college students can be very profitable as you have already ran the numbers on.  But they can be harder on the house as well.  Remember that these "Adults" are still "Kids" and are now learning how to function by themselves in society.  BE FIRM.  And as Brandon says all the time, "Train your tenants."  They are now away from home and rather they know it or not they are seeking structure and rules.

I should also ask... what is your CoC Return with college students vs without?
I would plan on keeping some extra aside for repairs (as you have mentioned) for college vs without.

CoC return would be 600% just using money down, but there was roughly $20,000 out of pocket for hvac, windows, remodel. I would say I will likely have to do $3500 in repair for the unit when they leave, assuming the floors will be ruined. Really as a new investor I am trying to think of worst case scenerio other than them burning it down, which wouldn't be terrible 😂

As for renting to college students there would be no zoning issue as it is a smaller city and probably 35% of the side of town it is on is occupied by student renters.

Another question have you ran the numbers through the bigger pockets calculators yet to compare?

I think this will really come down to a personal decision on your part.  Compare the two and then ask yourself if you are willing to go through college students?  Does that extra income justify the extra time you will have?

On the upper side to renting to college students is that they always have friends who are willing to take over their spot next year (landlord approval pending of course), parents back the lease, and you can sometimes get extra income over the summer as they tend to stick around.

However, you become very busy between tenants, doing fixes and getting contractors in there if the need arises during turnover.

A down side is if for some reason you get a vacancy you tend to not be able to fill it if you are out of that window that the college students are looking for a place.... not impossible, just becomes more difficult as time goes on.

Another thought, what do the exact surrounding houses look like in terms of residents?

If they are primarily college students then you might have more difficulty getting none-students to rent.  But if they are none-students, the flip does not hold true.

The rentals around it are in much lesser shape, the interior of the home is pretty close to econimcal obsolescence I would say. That being said, I wanted to try to make a change and attract a better renter because I do believe the area has future value. After weighing them out I think it is something I am willing to pursue. Thanks for the tips.

And I just realized that I never answered these two questions....

3. Are you just adding eviction clauses in the lease that have to do with noise complaints, unpaid bills, as well as taking a large deposit for damages?

      I always have eviction clauses for unpaid utilities... but this is because in my area the landlord is on the hook if the tenant doesn't pay.  So I want recourse to "encourage" on time payment of both rent and utilities.  The city can even put a lean on my property if it is unpaid.

4. Am I an idiot if I don't do this?

      Not at all, there are a lot of college rentals out there and people doing them.  In fact, here is a bigger pockets article on it for you.  https://www.biggerpockets.com/renewsblog/2015/07/29/introduction-student-housing/

As far as the numbers go, they're better. Renting by the bedroom/student will 99% of the time increase your profit. Management is the key, but that's the key with any rental. I've had a C class duplex get $1500 worth of damage b/c the tenant and his girlfriend got in a fight. Somehow my property got in the middle and said something out of line and they started throwing rocks thru his windows. Ha. So it damage can and will happen in any class if you do this long enough. Just have your reserves ready and write it off on your taxes. Get them out and get new ones in. 

Either way it's a management game. There are tons of investors that are horrible landlords. Weigh your options on a PM company if you're nervous or want to learn how they run their systems before your self manage. It's a self reflect question; do you have the mentality to PM this and all the hard decisions that come with it or do you want to pay someone to do it. Money is made thru the management side of it. Yes you have to buy correctly, but the asset produces cash flow thru the people living in it. If they are not managed correctly, the asset can quickly become a liability.

Renting to freshmen?    Unless these are older students returning to school this sounds like a disaster waiting to happen.

One issue you might want to look at is whether the college even allows freshmen to live off campus.  Some don't; some will require most freshmen (exceptions would be older students, married students, ex-military, etc.) to live on campus at least for the first year.

Gail

@Drake Espenlaub I'd recommend reading this post on college student rentals. That niche is minefield. But it can be very profitable if done with proper planning.

I agree with almost all of what @Charles Patterson has to say. Having rented to students for over 12 years I've learned that you absolutely have to set boundaries and be firm with them at all times.

https://www.biggerpockets.com/forums/52/topics/491...

Originally posted by @Drake Espenlaub :

A friend of my parents has a son in college, and came to me asking if I knew of anything to rent close to the school. I have a rental I am finishing up, but have put nicer finishes in it planning to not rent to college students.  These students will be freshman, and are "planning" to rent together for 4 years. Having been young at one time, I know this is not a reality. However, I do see it happening for 1 year.

It is a duplex 4/1.5 down and 2/1 up. Fenced in side yard, single car garage in back, parking for 4-5 cars. 

In talking to her she had said her son and his buddies are looking for a place to rent, they had all planned to take extra money from their loans and pay their rents a year in advance.  I was unsure about renting it to students because of the finishes I chose. Knowing her son fairly well, I know he/they will be partying in the house, likely to do 2-3k worth of damage. However she said there are 4 of them, they are all likely willing to pay for a years rent up front. Question being.

In the 4/2 - If you can get $500 a head for a year from each student up front (essentially 6k per student) $24,000 for the year in one payment, knowing it will be trashed, are you doing it? 

2. This will likely hurt my chances for tenancy upstairs in the 2/1, unless it rents to students as well.

3. Are you just adding eviction clauses in the lease that have to do with noise complaints, unpaid bills, as well as taking a large deposit for damages?

4. Am I an idiot if I don't do this?

The 4/1.5 would likely rent for $1100/mo with the 2/1 around $750.

I am leaning towards doing this, I am just trying to weigh my short term advantage vs the longer term set back.

Thanks

 How difficult is it to rent your duplex?

@MichaelPlante I wouldn't know as I am finishing up rehab and am yet to get a renter in it.

It is easy to charge extra for any damages from college kids because they just forward the fees to their parents and their parents are far away and just take care of it. This is the experience of many of my friends in school living off campus.

@Tyler Watts I am going to manage it myself, I have learned a lot of the handy side of things and don't have any fear of fixing the small stuff, also have built a network of handymen as far as having hvac guys, plumbers, electrician, dry wall finishers, I am confident I have that side covered. I also have been a manager in the business world for the last 8 years, so I think the management side will come to me after some learning curve. Thanks for the advice!

I’m interested in buying a six bedroom home,10 mins walk from a college, and I have plans to rent out five of the r ooms to students. Does anyone know the best time to advertise to students before school begins? Thanks in advance.

@Miaya Pearce In my market (Columbia, SC) it is typically January through April. Almost all of my leases start in June, July, or August and run to the next year. I've rented a few prior to January and quite a bit after April, but 90% of my properties are rented in those 3 months. Timing is critical in a seasonal market like student rentals.

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